Big Spreads

By David Dilmaghani

The way that I have been able to make so much money in the investment club is only because of two reasons. The difference between the bid and the ask of a company, and the fact that we buy at the last trade that a company had. In real life, you can=t buy at the last trade that the company had, you usually have to settle for a price that=s somewhere inbetween the bid and the ask. Penny stocks are preffered because unlike large companys, penny stocks have large spaces between the bid and the ask. For example, while zolteks last trade was $33.00 the bid may be $33.25 and the ask may be $33.50. You would make money from this (in the investment club) because you buy it at $33, and you=re pretty much guarenteed that it will go up to $33.25. Zoltek is more a long term investment. You wouldn=t make as much money as quickly as you would investing it into a penny stock thats last trade was $.005 and it=s bid was $.008 and ask was $.01. If we were to say that this stock went up to one penny, you would have doubled your money, because you buy and sell at the last trade, and you bought it at 1/2 a penny and it=s last trade went to 1 penny, you doubled your money, and you were able to predict it. Even if it went up to it=s bid, it would still make you a good profit. The key to investing in penny stocks with the investment club portfolio is to find a stock that has a big spread between it=s bid and ask, with the last trade on or below the bid, and then put all your eggs in one basket and invest in it. Just remember not to leave your money in the portfolio over night because a lot of these penny stocks go down by the time they open up the next morning.